Private equity attracted to digital businesses

Private equity investors are increasingly attracted to businesses with a strong digital presence as a key driver of growth, says Minter Ellison.

According to a report by law firm Minter Ellison titled Directions in Private Equity, a key and emerging theme within the private equity space is the interest in digitally focused businesses.

Moreover, the report found that the weaker Australian dollar and ongoing US recovery will result in greater competition for Australian assets from overseas buyers.

Minter Ellison private equity partner Ricky Casali said: “For 2015-16 in Australia, we’re seeing greater competition from overseas for both capital and deals and we expect this trend to continue in the long term.”

In the 2015 financial year, Mr Casali pointed out that a significant amount of offshore money flowed into Australia.

"While Australian institutional investors are increasingly looking to invest in offshore PE funds, in 2014-15 we saw significant amounts of offshore money flowing into Australia: on average, sub-$300 million funds raised around 40 per cent of capital from offshore; bigger funds raised 50 per cent – 70 per cent from offshore," he said.

The report found that health/medical, education and transport will be the most attractive sectors for private equity sponsors for the rest of 2015. However, it was noted that demand may exceed supply.

Minter Ellison report co-author Glen Sauer said: "Given the prices realised in those sectors in 2014-15 and competition from strategic corporate investors, we expect their focus in 2015-16 to shift to other areas such as financial services, food and retail opportunities.

“Non-core business units of larger corporates will also be attractive at the right price," he said.